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China Took To Boosting Its Market Sentiment

Chinese government appeared to be concerned about its weakened market, which increased debt and reduced growth. But, according to the officials, the problem can be solved, but measures should be picked very carefully as after PBOC cut its RRR for 3rd time in 2018, Shanghai Composite index dropped more than 20%. PBOC governor, Yi Gang, said that the Central Bank: "is trying to actively manage expectations".

Policymakers might opt to further targeted loosening and releasing more liquidity into the banking system through the regular open market operations. But, even these tools might not improve the market climate. China government might also present incentives to prop up domestic demand by expanding its annual budget deficit target or use fiscal levers like tax cuts to increase household income and promote domestic consumption and investment.

Moreover, Beijing could provide credit support for companies that switch from foreign markets to the domestic market. One policymaker stated: "We should develop other markets to substitute for the U.S. market", adding: "We need time to switch markets".

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